Friday, July 30, 2010

PROFITABLE BUSINESS IDEAS.

Money-Making Business Ideas

Well, this is what every upcoming entrepreneur is looking for. Profit never remains same for all the businesses - this is very much related to who, where and how runs a business. This article has few tips to be considered while thinking about a profitable business idea.



Exposure and Expertise

Pick a business that you understand well, your expertise over the venturing plan should be par with any other experts on that business. Your exposure to the business is very vital as you are going to own and run it.



If you are currently working on similar business then don't quit your day job to start your own business until you are confident on your skill sets. If you are running a part time business and want to convert it to fulltime then don't leave your job unless you have enough money to feed your family and run a business. If you are planning to convert your hobby to a commercial business then make sure you gathered substantial information and developed adequate interest to make it a full fledged company.



Market Survey

In order to build a successful business you need to make ample market survey. A person can judge the product's potential, business competitors, marketing scopes and much more while doing an extensive survey. Look for the related content in internet, buy some books, talk to people from similar business, hire professionals to advice, etc. A smart businessman will never start a business before having adequate research.



Financial Baking

Arranging finance is most essential for a startup business, you might start a business but if you don't have a strong financial baking then you might risk your product. You must predict the breakeven time and arrange the funds in advance to run your business. There are many venturing firms, banks, private loan lenders in the market who can help in financing your company.

Tuesday, July 27, 2010

Cashing Out ... What is Your Business REALLY Worth?

Question: What is your business REALLY worth?
Answer: Whatever someone else is willing to pay for it at the time.

That's a true statement as far as it goes but it doesn't take into
account that the way you arrive at a value for your business can
give you much-needed ammunition when it comes to justifying
your asking price and therefore allow you to influence what the
prospective purchaser is willing to pay.

Here's a quick primer of the various methodologies commonly
used for valuing businesses (for purposes of imminent sale or
otherwise):

1. Asset Valuation

This is used by businesses with predominantly physical assets,
especially inventory. Typical businesses that would use this
approach are manufacturing and retail. The valuation takes into
account the following figures: (a) the fair market value of fixed
assets and equipment; (b) the value of leasehold improvements;
(c) owner benefit (the seller's discretionary cash for one year -
comes from the adjusted income statement); and (d) inventory.

2. Capitalization of Income Valuation

This is used by businesses with predominantly intangible assets.
It places no value on physical assets, only intangibles. Typically
used by service businesses. Under this method, various factors
are given a weighting of 0-5 with 5 being the most positive score.
The average of these factors yields the "capitalization rate" which
is then multiplied by the buyer's discretionary cash (75% of the
owner benefit defined in 1. above) to arrive at the market value of the
business. The factors to be rated are: (a) owner's reason for selling;
(b) length of time the company has been in business; (c) length of
time the current owner has owned the business; (d) the degree of
risk; (e) profitability; (f) location; (g) growth history; (h) competition;
(i) barriers to entry; (j) future industry potential; (k) customer base;
and (l) technology.

3. Capitalized Earnings

This method is based on the rate of return anticipated by the
investor. Small businesses are expected to have a rate of return
of 20-25%. So, if your small business has expected earnings of
$10,000 for the year, its value may be $40,000 - $50,000.

4. Cash Flow

This method is simply based on how much of a loan the purchaser
could get based on the adjusted cash flow of the business. The
adjustments to cash flow are for amortization, depreciation and
equipment replacement. Obviously, when using this method, the
value of the business fluctuates with changing interest rates.

5. Discounted Cash Flow

This method discounts the business's projected earnings to adjust
for real growth, inflation and risk. It calculates the value today (i.e.,
discounted for time) of the business's future earnings.

6. Leapfrog Start-up

This is used when the buyer wants to save him or herself the
cost, time and effort of ramping up a new business. The buyer
estimates what it would have cost to do the startup less what is
missing plus a premium for saved time. The more difficult, expensive
or time consuming the start-up would otherwise be, the higher the
value that will be arrived at using this method.

7. Excess Earning Method

Similar to the capitalized earnings approach, but the return on assets
is separated from other earnings which are deemed "excess" earnings
generated. The return on assets is usually determined by industry
averages.

8. Owner Benefit Valuation

This method is based on the seller's discretionary cash flow. It is
usually used for businesses whose value comes from its ability to
generate cash flow and profit. The formula is to simply multiply the
the owner benefit by 2.2727.

9. Rule of Thumb Methods

These are rough guides based on industry averages. Many industry
organizations have developed methods for their particular industries.
They are highly unscientific and hardly rigorous but act as a good
"gut-check". You certainly wouldn't use them on their own but they
can be useful to check that the value you've arrived at using a more
scientific approach is in the ballpark.

10. Tangible Assets (Balance Sheet)

This method is basically a value of the business's current assets and
nothing else. Typically used where the business is losing money.
This approach will usually be utilized when selling the business is
just a matter of getting the best possible price for the equipment,
inventory and other assets of the business. A good strategy is to
approach other firms in the same business that would have a direct
use for such assets.

11. Multiple of Earnings

A multiple of the cash flow of the business is used to calculate its
value.

12. Value of Specific Intangible Assets

The value of the business is based on how much it would have cost
the buyer to generate the intangible asset. Typically used where
specific intangible assets that come with the business are highly
valuable such as a customer base. Customers with a high
likelihood of being retained are valuable in most industries.
The most appropriate valuation method for you depends very much
on the nature of your business. If you manufacture widgets, for
example, you'll want to use the asset valuation method. If you offer
website design services, on the other hand, you'll want to use the
capitalization of income method instead. If you're selling a web-
based business where the major asset is your high traffic volume
and/or list of ezine subscribers, you will probably want to use the
value of specific intangible assets method, such as 10 cents
per subscriber (or whatever the going rate is).

Is more than one valuation method applicable to your business?
If so, calculate the value of your business in accordance with
all of them and see which gives the best result (i.e., highest
value). Another good approach is to average your calculations
to get a reasonable ballpark figure.

Whichever method you choose, understand it inside out so
that when the time comes, you can authoritatively justify your
asking price to potential buyers. Pulling a figure out of thin air
without any substantiation whatsoever is much less impressive
than being able to say, with confidence, "I worked with my
advisers using a number of different methodologies to value the
business. We adopted the value of specific intangibles method
because the backbone of the business is our large, loyal ezine
subscriber database. We also calculated it on the basis of
capitalization of income, which yielded a similar value. I can
show you the calculations if it will help you see where the number
comes from."

By following this approach you may not necessarily get the
value you are after (for this reason, many sellers artificially
inflate their asking price so they have room to be negotiated
down), but at least you have a solid starting point for
negotiations and are much more likely to be able to negotiate
a price both buyer and seller are able to live with.
Elena Fawkner is editor of Home-Based Business Online. Best business ideas and opportunities for your home-based or online business.

HOW TO MAKE YOUR SMALL BUSINESS GROW

"15 RULES FOR SUCCESS IN YOUR SMALL BUSINESS TODAY"

Rule 1 - It ain't as bad as you think, it will look better in the morning

If there's one experience universal to ALL home-business owners, particularly those running a business on the internet, it's the occasional feeling that you're just spinning your wheels, and not getting anywhere. The number of people who give up on their businesses just as they approach the brink of success is staggering. So hang in there and remind yourself, when things look bleak, that tomorrow is another day, things really aren't as bad as they seem and things really WILL look better in the morning.

Rule 2 - Get mad, then get over it

OK, I concede this is more general advice than home-business advice but it applies in your home business just as it does anywhere else. Resentment and unexpressed anger really don't hurt anyone but the person feeling resentful and angry. Have you ever noticed how completely unproductive you are when burdened by resentment and anger? So feel it, express it (constructively) and then move on. As the man said, "get over it".

Rule 3 - Avoid having your ego so close to your position that when your position falls your ego goes with it

Over the course of my career I have, from time to time, met people whose identity and sense of self-worth is so enmeshed in what they do for a living that they literally don't have an identity outside of their work. Because they rely on an external source for their self-esteem and confidence, they find it necessary to continually and relentlessly bolster their personal positions, often at the expense of others, often resorting to political maneuvring in the workplace to maintain and improve their supposed 'status'.

These people are the 'empire builders' you sometimes find in organizations. They jealously guard their power base all the while gathering unto themselves more and more responsibility, beyond the point of being able to do everything they take on.

Because their identity and sense of self-worth depends upon their position within their organization, what happens when their position disappears, such as in a corporate downsizing? It freefalls.

Don't let this happen to you. Remember that you are something separate and distinct from your business. Sure, you can be proud and pleased with your accomplishments but don't define yourself through them. Your self-worth is something that comes from inside your human self, not your business.

Ironically, keeping a professional detachment is more likely to secure the ultimate success of your business. Detachment brings perspective, objectivity and clarity, which helps you make better quality decisions.

Rule 4 - It can be done

Don't allow self-imposed limitations to restrict what you can and will do. You can do anything if you set your mind to it. Well, of course, it must be something that is within your power - you can't just set your mind on growing a third arm, for example.

But for anything that is within human power and capability, the saying "where there's a will is a way" is so true.

Get into the discipline of planning your life and where you want it to go. By setting goals and planning the steps that will help you reach them, you can achieve literally anything your heart desires.

Rule 5 - Be careful what you choose, you may get it

Following on from this, it should go without saying that what you set for your goals is something you truly want because if you do practice the discipline of goal setting you will surely get it.

Rule 6 - Don't let adverse facts stand in the way of a good decision

Keep your eye on the prize and don't be distracted by what's happening on the sidelines. Sure, you may not have entered the marathon had you known there were going to be 1,000 other runners but does that mean entering the marathon was a bad idea? No.

Make your decisions based on quality information and what's in the best interests of your business. If someone else comes along who represents competition for your business, don't be put off your game. Just run your own race. There's ALWAYS a way to distinguish yourself from your competition.

Rule 7 - You can't make someone else's choices. You shouldn't let someone else make yours

IGNORE your mother when she tells you you're crazy for chucking in your nice SAFE secure little job to start your own business. Follow your dream, no-one else's.

Rule 8 - Check small things

Like the fine print in contracts. Like the URL in that sales letter you've just put the finishing touches on. Like your spelling and punctuation. In other words, pay attention to detail.

Rule 9 - Share credit

You've heard the saying, "no man is an island". No woman is either. Remember and acknowledge the people who have helped and continue to help you get where you want to go. Acknowledge the achievements of others.

Rule 10 - Remain calm, be careful

Frenzy and recklessness are hardly the prescription for long-term success in your business. In the face of unexpected challenges, unexplained downturns in business or failure to achieve the results expected, recognize that these are just part of the thrust and parry of business life and use a calm, methodical approach to the problem.

Don't just react blindly or chuck away all your hard work and try something completely different unless a thorough, calm and careful investigation convinces you that you are completely off-beam.

Calmly analyze your situation and use your intelligence to correct the situation. Sometimes a one degree turn of the wheel is all that is required to get back on course, not a completely new rudder.

Rule 11 - Have a vision, be demanding

This rule goes hand in hand with rules 4 and 5. In order to set goals and plan ways to achieve them you must first set your vision. Think big, be brave. There is nothing you can't achieve so make sure your efforts are going to be for something truly worthwhile.

Rule 12 - Don't take counsel of your fears or naysayers

All of us have moments of self-doubt or even fear when embarking on a journey to an unknown destination. If what you have planned for yourself brings with it feelings of anxiety, nervousness, even fear, pay attention to them but don't take their counsel.

They are symptoms of grand thinking, of stretching beyond the boundaries of your comfort zone. As the book says, feel the fear and do it anyway.

Rule 13 - Perpetual optimism is a force multiplier

This rule is closely related to rule 1. Believe that things will work out, that they will look better in the morning, that everything's going to be OK. Repeat the words to yourself as a mantra if you must but instill a spirit of indomitable optimism in your outlook and you will attract success into your life.

Rule 14 - Sometimes being responsible means pissing people off

You can't please all of the people all of the time so don't waste your time or energy even trying. You have a responsibility to the ultimate success of your business and to your own personal success. If that means you occasionally have to say no to people to stay true to your objectives, do it. If it means you have to alienate some people because they don't personally agree with what you are doing, that's their problem.

In other words, stay focused on your plan. If others don't like it or agree with it, too bad.

Rule 15 - You never know what you can get away with unless you try

If you don't ask you don't get. And if you don't take you don't get. Leave nothing on the table. If an opportunity comes along, take it. It may not come again. And remember, in chaos there is opportunity. While everyone else is running around like chooks with their heads cut off, you just bring up the rear and clean up on all the opportunities that are just lying there for the taking among the chicken scratch.

Hindsight truly is 20/20, no doubt about it. Perhaps, like me, you're thinking that if you'd known then what you know now, you would have gone a lot further a lot faster. But as with any form of progress, it's the journey, not the destination, that provides the education and creates the experience and, through it, wisdom. And that's something no book can teach you and money can't buy.